ECO403 Midterm Solved MCQs

Q1. Macroeconomics distinguishes between the real economy and the...

1. ...monetary economy.
2. ...virtual economy.
3. ...normative economy.
4. ...underground economy.

Correct answer: ...monetary economy.

Q2. During business cycles the opposite of a trough is ...

1. ...an inflation
2. ...a hyperinflation.
3. ...a trend.
4. ...a peak.

Correct answer: ...a peak.

Q3. According to the analysis of the British economist John Maynard Keynes,...

1. ...markets coordinate supply and demand so that a policy of laissez-faire would prevent recessions.
2. ...economic fluctuations were the cumulative result of mistakes made by businesses and households in an uncertain world.
3. ...government demand could be used to smooth fluctuations in aggregate output and income.
4. ...supply creates its own demand through the circular flow of economic activity.

Correct answer: ...government demand could be used to smooth fluctuations in aggregate output and income.

Q4. In order to influence spending on goods and services in the short-run, monetary policy is directed at directly influencing...

1. ...unemployment rates.
2. ...inflation rates.
3. ...interest rates.
4. ...economic growth rates.

Correct answer: ...interest rates.

Q5. "Inflation is generally procyclical" means...

1. ..."higher rates of inflation tend to precede periods of high economic growth."
2. ..."the rate of inflation tends to rise in periods of high economic growth and fall in periods of low economic growth".
3. ..."prices on average rise in an economic expansion but fall after a business cycle peak."
4. ..."more inflation results in less capacity utilization."

Correct answer: ..."the rate of inflation tends to rise in periods of high economic growth and fall in periods of low economic growth".